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HomeMy WebLinkAbout10370 ORDINANCE NO. 10370 AN ORDINANCE APPROVING AN AIRPORT USE AND LEASE AGREEMENT BETWEEN THE CITY OF PUEBLO, A MUNICIPAL CORPORATION, AND SOUTHERN AIRWAYS EXPRESS, LLC, AND AUTHORIZING THE MAYOR TO EXECUTE SAME WHEREAS, the City of Pueblo is the owner and operator of the Pueblo Memorial Airport together with the land on which said Airport is situated; and WHEREAS, Southern Airways Express, LLC, is desirous of leasing certain property for the purpose of a commercial service airline operation, where said property is owned by the City of Pueblo; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. A certain Airport Use and Lease Agreement (“Lease”), by and between the City of Pueblo, a Municipal Corporation, and Southern Airways Express, LLC, a Limited Liability Company, to lease space for a commercial service airline operation at the Pueblo Memorial Airport, a copy of which is attached hereto and made a part hereof by reference, after having been approved as to form by the City Attorney, is hereby approved. SECTION 2. The Mayor is hereby authorized to execute the Lease on behalf of the City of Pueblo, and the City Clerk shall affix the Seal of the City thereto and attest same. SECTION 3. The officers and staff of the City are authorized to perform any and all acts consistent with the intent of this Ordinance and the attached Lease to implement the terms and conditions described therein. SECTION 4. This Ordinance shall become effective on the date of final action by the Mayor and City Council. Action by City Council: Introduced and initial adoption of Ordinance by City Council on December 27, 2022. Final adoption of Ordinance by City Council on January 9, 2023 . President of City Council Action by the Mayor: ☒ Approved on January 11, 2023 . □ Disapproved on based on the following objections: Mayor Action by City Council After Disapproval by the Mayor: □ Council did not act to override the Mayor's veto. □ Ordinance re-adopted on a vote of , on □ Council action on _______ failed to override the Mayor’s veto. President of City Council ATTEST City Clerk City Clerk's Office Item # R5 Background Paper for Proposed Ordinance COUNCIL MEETING DATE: January 9, 2023 TO: President Heather Graham and Members of City Council CC: Mayor Nicholas A. Gradisar VIA: Marisa Stoller, City Clerk FROM: Greg Pedroza, Director Aviation SUBJECT: AN ORDINANCE APPROVING AN AIRPORT USE AND LEASE AGREEMENT BETWEEN THE CITY OF PUEBLO, A MUNICIPAL CORPORATION, AND SOUTHERN AIRWAYS EXPRESS, LLC, AND AUTHORIZING THE MAYOR TO EXECUTE SAME SUMMARY: An Airport Use and Lease Agreement between the City of Pueblo and Southern Airways Express, LLC (Southern Airways), is attached for consideration. This agreement covers the use of certain areas in the Airport Terminal building for providing passenger airline service at Pueblo Memorial Airport. PREVIOUS COUNCIL ACTION: City Council approved this same type of agreement with SkyWest Airlines on November 13, 2017, to cover the previous U.S. Department of Transportation (USDOT) agreement term. This Agreement with Southern Airways Express, LLC, will cover the new USDOT agreement term. BACKGROUND: Air service at the Pueblo Memorial Airport is under the Federal Essential Air Service (EAS) program, which is managed by the USDOT. On July 5, 2022, the USDOT issued a request for proposals from airlines to provide air service at Pueblo, CO for the term beginning January 1, 2023 and ending January 31, 2024. Only Southern Airways submitted a proposal. Based on the sole submittal and with agreement from the community, the USDOT awarded the contract for 2 years. SkyWest has been ordered to hold in place until January 8, 2023. The Agreement between the City and Southern Airways is for the use of Airport facilities. FINANCIAL IMPLICATIONS: The revenue from this agreement will to be about $19,560.00 annually, as determined by the following:  Southern Airways will pay the City $19,560.00 annually for exclusive use of counter space, office space, and outbound baggage area. This is an increase from SkyWest’s annual rent of $19,515.00.  The aircraft operated under the EAS contract will not generate landing fees because they do not meet the maximum gross landing weight threshold set by Pueblo Municipal Code.  Partial rent forgiveness is offered for the 2024 contract term if Southern Airways enplanes more than 10,000 passengers through either regularly scheduled flights or charter flights. The FAA considers airports that have less than 10,000 passengers annually as a Nonprimary Commercial Service Airport rather than a Primary Service Airport. Airports with more than 8,000 enplanements but fewer than 10,000 are eligible for the $600,000 apportionment each fiscal year, whereas airports with over 10,000 enplanements qualify for $1,000,000 in funds. The rent forgiveness is incentivization to reach the number of passengers which will qualify the Airport for the higher apportionment of funds. BOARD/COMMISSION RECOMMENDATION: The Airport Advisory Committee is aware of the award from the USDOT and is in support of the air carrier’s proposal as the only submittal. STAKEHOLDER PROCESS: There is no stakeholder process required. ALTERNATIVES: If this Resolution is not approved, Southern Airways would not be able to meet its obligation to the USDOT and the City would have a commercial service provider. RECOMMENDATION: The Department of Aviation recommends the passage of this resolution. ATTACHMENTS: 1. Southern Airways Express Lease - Final PUEBLO MEMORIAL AIRPORT AIRPORT USE AND LEASE AGREEMENT THIS AIRPORT USE AND LEASE AGREEMENT("Lease"), is made and entered into this 91h day of January, 2023, by and between the City of Pueblo, a Municipal Corporation, with an address of One City Hall Place, Pueblo, Colorado 81003, ("Lessor") and Southern Airways Express, LLC, with an address of 2875 South Ocean Boulevard, Suite 201, Palm Beach, Florida 33480 ("Lessee"). WHEREAS, Lessor owns certain real property in the County of Pueblo, State of Colorado, known as the Pueblo Memorial Airport ("Airport"), together with the land on which said Airport is situated, and Lessee is engaged in the business of transporting persons, property, cargo, and mail by air; and WHEREAS, Lessor desires to grant the use of, and Lessee desires to use, certain premises and facilities at the Airport, together with certain rights, licenses, and privileges thereon. NOW, THEREFORE, Lessor does hereby grant unto Lessee for the purpose of conducting its air transportation service business, and Lessee does take and accept from Lessor, for such purpose, the use of certain premises and facilities, rights, licenses, services, and privileges in connection with and on the Airport as follows. AIRPORT USE AND LEASE. A. Airport. Lessor grants to Lessee the non-exclusive use of the common areas of the Airport and its appurtenances including, if available and functioning, but not limited to, landing field, runways, aprons, taxiways, roadways, sewer and water facilities, flood lights, landing lights, and all conveniences for flying, landing, and take-offs of aircraft of Lessee, which use shall include the operation of a transportation system by Lessee's aircraft for the carriage of persons, property, cargo, and mail, including without limitation, loading and unloading of its aircraft, the right to load and unload persons, property, cargo, and mail at the Airport by such automobiles, buses, trucks or other means of conveyances as Lessee may require in the conduct of its business, and the right to install, maintain, use and operate such radio, communications, meteorological and aerial navigation equipment and facilities in, on, or about the Airport as may be deemed necessary by Lessee for its operations provided same shall not interfere with Lessor's, or Federal Aviation Administration's ("FAA"), existing or expanded equipment and facilities, as well as the right, subject to Lessor's approval, to install advertising signs, and any other operation or activity reasonably necessary to the conduct by Lessee of its air transportation service business or training of its personnel, provided such other operation or activities will not interfere with the use of the Airport by Lessor or its employees, agents, or other tenants and such other operation or activities are used on the Airport. All worn, faded, damaged, or outdated signs will be repaired or corrected by Lessee upon notice from the Director of Aviation B. Terminal Building. 1. Lessee shall be entitled to the use of the following leased premises in the Page 1of19 terminal building: a. Counter Space—210 square feet b. Office Space —286 square feet c. Outbound Baggage Space—660 square feet d. Inbound Baggage Carousel (non-exclusive use) 2. The Lessor shall designate the specific areas to be used by Lessee. Lessee's designated spaces are shown in Exhibit"A," attached hereto and incorporated herein. 3. Indoor operation of gasoline-powered equipment is prohibited in the terminal building, including the baggage and freight handling areas. 4. Areas will be designated for parking and storage of equipment, machinery, and vehicles between flight times. 5. Employees of the Lessee shall park in designated parking areas while working with the understanding that public parking is meant for the use of passengers, guests, and patrons. 6. Lessee, its employees, passengers, guests, patrons, and invitees shall have the use, in common with others, of any public space now available, or which may hereafter become available, in the terminal building, including, but not limited to, waiting rooms, restrooms, baggage collection areas, and security. C. Other. 1. Lessee shall have the non-exclusive right of ingress and egress, without charge, to and from the premises outlined in Paragraph 1.6 above. 2. Lessee may purchase or otherwise obtain property, facilities, or services deemed by Lessee to be required by, or incident to, its operations from any persons or organizations it may choose, provided that such suppliers of materials and furnishers of service have complied with the requirements of federal law and Section 3-1-2(c) of the Pueblo Municipal Code to the extent applicable; and further provided, persons or organizations furnishing charter aircraft services to Lessee in substitution of Lessee's scheduled flights shall be exempt from the requirements of said Section 3-1-2(c). 3. The leased premises will be used for the regular business of a full service air carrier. Any aircraft stored at the Airport must be continually registered with the FAA throughout the life of this Lease and the tail numbers for same must be reported to Lessor. Lessee agrees to report any changes in aircraft tail numbers to Lessor within fourteen (14) days, in order for Lessor to comply with FAA reporting requirements. 4. This Lease and Lessee's use of the Airport are subject to the easements, rights of way, covenants, conditions, restrictions, reservations, and limitations appearing of record, and all applicable zoning and land use laws, ordinances, codes, and regulations, including but not limited to all conditions, regulations, restrictions, and requirements imposed by the FAA, governing and regulating the Airport and its uses. 5. Lessee, its officers, agents, and employees shall faithfully observe and comply with all minimum standards and rules regulating operations and activities from and upon the Airport adopted from time to time by Lessor. Such minimum standards and rules Page 2 of 19 shall not be applied arbitrarily, discriminatorily, or unreasonably. If any provision of this Lease shall conflict with any provision of the minimum standards or rules adopted or amended by Lessor after commencement date, the conflicting provision of this Lease shall control. II. TERM. A. The term of this Lease shall be for the period commencing January 15, 2023, and ending January 31, 2025. Unless terminated earlier as provided herein, this Lease shall expire and terminate at the end of the term and Lessee shall have no further right or interest in the leased premises, except that upon early termination of this Lease for any reason, Lessee shall have the right for a period of ten days after the date of termination, to remove any or all of its personal property from the Airport, provided, however, that Lessee shall not be in default in its payments to the Lessor hereunder and Lessee shall repair all damage to the Airport caused by such removal. B. Should Lessee holdover the use of or continue to occupy the leased premises after the expiration or termination of this Lease, such holding over shall be deemed merely a tenancy for successive monthly terms upon the same terms and conditions as provided in this Lease, subject to termination upon thirty (30) days prior written notice. Lessee shall continue to pay rent without an express written agreement as to such holding over, except that, the monthly rent will become equal to one hundred twenty-five percent (125%) of the rent for the last month payable hereunder. C. Notwithstanding the foregoing, should the Federal Department of Transportation ("DOT") mandate a hold and that Lessee continue to provide services at the Airport past the Lease termination date, the term of this Lease will be automatically extended to the end of the federally mandated hold period upon the same terms and conditions of this Lease and without an increase in rent for said period. III. RENTALS AND FEES. A. Lessee shall pay to Lessor monthly as rent for the leased premises and use of the Airport covered by this Lease, $1,630.00 per month. The total yearly rent for the leased premises and use of the Airport is $19,560.00. B. The rents shall be increased biennially based upon the consumer price index for all urban consumers, CPI-U (all items 1982-1984=100) or comparable index if the Department of Labor changes or modifies the CPI-U or no longer publishes the CPI-U. The rents shall be increased by a percentage equal to the percentage increase in the CPI-U during each preceding two-year period over the comparable CPI-U for the first month of each 2-year period. If there is no percentage increase in the CPI-U for any preceding 2-year period, the rents will remain the same as the preceding 2-year period for the next 2-year period. In no event, shall the percentage increase for the rents be greater than five percent (5%) for any 2-year period. C. The Lessee hereby agrees to pay when due all rent, fees, and charges imposed by the Lessor for the use and operation of the Airport. The fees and charges Page 3 of 19 include, but are not limited to, landing fees, permit fees, security charges, and administrative or service fees. D. Rents shall be paid monthly without notice, offset, or deduction on or before the tenth (10th) of the month, and fees shall be paid monthly without notice, offset, or deduction on or before the tenth (10th) of the following month, at the City of Pueblo Director of Aviation's office and shall be accompanied with such reporting forms as the Director of Finance shall determine. Rent not paid by the tenth (10th) of the month shall accrue a late fee of eight percent (8%) per month. Lessor shall have the right to examine and audit Lessee's and its subtenant's books and records to determine the accuracy of the numbers of gallons sold and the revenues derived by Lessee, fees, and their calculation. E. Should Lessee reach 10,000 enplanements at the Airport through regularly scheduled services and charter flights within the federal fiscal year, and such enplanements qualify the Lessor as a Primary Service Airport with the FAA and Lessor receives at least $1,000,000.00 from the FAA as its federal apportionment because of such status, Lessee shall not have to pay the rent set forth in Section IIIA from January 1, 2024 through October 31, 2024. Rent shall only be waived for the stated months. F. Lessee agrees to pay the standard rate for all flights of the Lessee that land at the Airport, to include any flight that is diverted to the Airport by the Lessee, provided, however, that no fee shall be due and payable in the event an aircraft departs from the Airport to return and land at the Airport because of meteorological conditions, mechanical or operating causes, or for any similar emergency or precautionary reason. The standard rate is currently set at $1.00 per maximum landing weight ("MLW') over 25,000 pounds for non-signatory landing fees. The standard rate may be updated by Lessor periodically in accordance with FAA regulations and municipal ordinance. G. Within five (5) days following the end of each calendar month, the Lessee shall transmit to the Director of Aviation a true and accurate report, giving data necessary to calculate the amount of standard rate fees. Data for training flights at Pueblo is to be included. Lessee agrees to pay standard rate fees monthly within thirty (30) days of date of statements from Lessor. IV. USE OF AIRPORT AND LEASED PREMISES. A. The Airport and leased premises shall be used and occupied by Lessee as a full service air carrier. The terminal areas shall be used for Lessee's business, flight preparation, and other incidental office work. The leased premises shall not be used for the storage of non-aeronautical personal property, living accommodations, or in any other way inconsistent with this Lease. Failure to abide by this provision shall constitute a material breach of this Lease. B. Lessee shall not park or leave, or allow to be parked or left, aircraft on the taxiways or on pavement in a manner which interferes with or obstructs access to adjacent hangars or public areas. Parking of automobiles will be permitted only in designated spaces outside of the airport fence. Nothing in this agreement provides exclusive access to the entrance and exit gates into and out of the Airport to Page 4 of 19 Lessee. C. Lessee, its employees, and invitees shall have the right of ingress and egress between designated Airport access points and areas of use over, upon, and through such streets and not others as from time to time shall be designated by the Director of Aviation. Driveways from existing streets into the areas of use shall be located as designated by the Lessor through the Director of Aviation. D. On the Effective Date, as later defined, and annually thereafter, Lessee shall provide Lessor with a list of the Airport areas and any Airport tenants it intends to access when providing services. Lessee shall keep this list current and report any changes to the Lessor upon such change being made. E. Lessee shall not have exclusive use of any area of the Airport or of any Lessor equipment, unless Lessee contracts with Lessor for such use, and all such uses shall be as determined by the Director of Aviation in his or her sole discretion. All areas of the Airport and all Airport equipment will be inspected by Airport staff prior to use by Lessee, and Lessee shall be required to sign-off on Airport staff's inspection prior to said use. F. Lessee shall use the common ramp area in compliance with Lessor's ground traffic and aircraft parking plans and regulations, which will reasonably accommodate Lessee's current and future use for the purposes set forth in this Lease. V. MAINTENANCE OF AIRPORT. A. Lessor shall provide all maintenance services required to keep in good repair the Airport terminal building and all appurtenances, facilities, and services now or thereafter connected with the foregoing, and shall operate the Airport in a manner at least equal to the standards or ratings of Airports of similar size and character issued by the FAA. Lessor shall maintain the premises leased hereunder for Lessee's use in a good condition and shall provide maintenance necessary to accomplish that end. Lessor reserves the right, but shall not be obligated to Lessee, to maintain and keep in repair the landing area of the Airport and all publicly owned facilities of the Airport, together with the right to direct and control all activities of Lessee in this regard. Notwithstanding the foregoing, Lessee shall be responsible for repairing any damage to the Airport or its facilities caused by it or its agents, employees, or invitees other than that due to normal wear and tear. If Lessor fails to make such repairs or if Lessor shall be in default in the performance of any provision of this Lease, such failures or default shall not give rise to any action or claim by Lessee or its agents, employees, or invitees against Lessor. Lessee's only remedy for such failure or breach is to terminate this Lease. B. Lessee shall, at its own expense, keep the leased premises neat, clean, safe, and orderly at all times, free of waste, rubbish, and debris, and shall provide a complete and proper arrangement for the sanitary handling and disposal of all trash, garbage, and other refuse resulting from Lessee's activities at the Airport. No outside storage of parts, materials, equipment, inventory, or other materials shall be permitted. C. All maintenance associated with Lessee's services and its enplanements and Page 5 of 19 deplanements shall be the responsibility of Lessee. Lessee shall be responsible for snow and ice removal from the doors of its airplanes to the airport terminal building. Lessor will not provide ice melt, shovels, or other equipment, but Lessee may store such equipment in the outbound baggage space. VI. UTILITY COSTS. Lessor shall be responsible for all utilities supplied to the leased premises and Airport. Additions, deletions, or adjustments to utilities extended to the areas used by Lessee shall not be made without prior written approval from the Director of Aviation. Costs for utilities shall be incorporated within stated rent amounts. VII. RIGHT OF INSPECTION. The Lessor reserves and retains for its officers, employees, and authorized representatives the right to enter the leased premises and any other area of the Airport during reasonable business hours, and after prior notice, for the purpose of inspecting and protecting the leased premises and Airport and for doing any and all things which the Lessor may deem necessary for the proper general conduct and operation of the Airport and in the exercise of the Lessor's police power. VIII. IMPROVEMENTS BY LESSEE. A. Lessee, at its own expense, may construct, install, alter, modify, repair, and maintain in or on any space which is or may be leased by Lessee hereunder and described in Paragraph I.B, any improvements that it shall determine to be necessary for use in connection with its business. No restrictions shall be placed upon Lessee as to the architects, contractors, or materialmen who may be employed by it in connection therewith, who shall have free ingress and egress from said premises. Notwithstanding the foregoing, no improvement to or modification of the leased premises shall be made by Lessee until plans and specifications therefore have been first approved by Lessor, which approval shall not be unreasonably withheld, and provided the construction and installation of such improvement to or modifications of the leased premises shall be in compliance with all applicable laws and codes and shall not unreasonably interfere with Lessor's operation of the Airport or terminal building or other lessees' use thereof. Lessee shall ensure no liens are placed on Lessor's property for such work and shall defend and indemnify Lessor from the same. B. All structures and improvements constructed or erected hereunder by Lessee, excluding movable trade fixtures, shall constitute a part of the leased premises and Airport and therefore such structures and improvements cannot be removed from the land. Fee simple title to the structures and improvements shall vest with Lessor immediately upon completion of construction of same, free of all liens and encumbrances. Notwithstanding that title is in or vests in Lessor, Lessor shall not be responsible for any defects in the structures and improvements and shall have no obligation or responsibility to maintain, repair, or restore the same; all such obligation and responsibility shall be that of Lessee. IX. TAXES, LICENSES, AND LIENS. Page 6 of 19 A. Lessee covenants and agrees to pay promptly when due all taxes, fees, licenses, and other governmental charges of whatever nature assessed against or applicable to Lessee and the leased premises, or to Lessee's property and operations thereon. Possessory interest tax is assessed by the County of Pueblo and is the responsibility of the Lessee. The Lessor is a tax-exempt entity and shall not be liable for any tax of the Lessee. All applicable taxes and costs shall be paid by Lessee, even if Lessee was unaware of such taxes and costs. B. At all times during the term of this Lease, and of any renewal or extension hereof, Lessee shall, at its own cost and expense, provide and keep in good standing business licenses with the City of Pueblo and the State of Colorado. Lessee shall obtain and maintain any other licenses or certifications required by law, including those required by the FAA. Upon request, Lessee will provide Lessor with certificates of good standing evidencing that all licenses or certifications are current and not subject to discipline. C. Lessee covenants and agrees not to permit any mechanic's or material man's lien to be filed against the leased premises, Airport, or any part or parcel thereof by reason of any work or labor performed or materials furnished by any contractor, subcontractor, mechanic, or material man. Lessee further covenants and agrees to pay promptly when due all bills, debts and obligations incurred by it in connection with its operations on the Airport, and not to permit the same to become delinquent and to suffer no lien, mortgage, judgment, or execution to be filed against the leased premises and Airport without the Lessor's prior consent which will not be unreasonably withheld, except that in no instance will the lien, mortgage,judgment, or execution be in any way an impairment of the rights of Lessor. D. Lessees performing services using Airport Operations Areas ("AOA") must annually undergo American Association of Airport Executives ("AAAE") Airport News Training Network ("ANTN") Digicast Signatory Training and hold a current signatory certificate that must be filed yearly with Airport Administration. Such Lessees shall keep a record of all documentation related to badging and produce it upon request. X. LIABILITY AND INSURANCE. A. Lessee agrees to indemnify, defend, and save and keep Lessor, its officers, agents and employees, harmless from any and all loss, expense, including reasonable attorney fees, claims, demands, or liability, resulting from the use of the Airport, terminal building, Lessee's designated space, and all other Airport facilities, by Lessee or any of its employees, agents, licensees, or invitees in their use and occupancy thereof. Lessee assumes all risk of loss, damage, injury, and liability for the same that may occur to Lessee, Lessee's guests, Lessee's aircraft and Lessee's improvements and property in or upon the leased premises, terminal building, and other facilities and Lessor shall not be liable or responsible for any such loss, damage, or injury, regardless of the cause thereof. B. Lessee shall obtain and maintain in effect, at Lessee's expense, during the term of this Lease,Aircraft Liability Insurance covering both owned and non-owned aircraft with coverage for both aircraft passengers and non-passengers. The Aircraft Liability Insurance shall be written with a combined single limit for bodily injury and Page 7 of 19 property damage of$5,000,000.00 per occurrence and $10,000,000.00 aggregate. C. Lessee shall also obtain and maintain in effect at Lessee's expense, during the term of this Lease, Airport Liability Insurance, covering the premises operations of Lessee, including operation of mobile equipment, with a combined single limit of not less than $25,000,000.00 for bodily injury and property damage, and such insurance shall include Products & Completed Operations, Contractual Legal Liability, and Personal Injury Legal Liability. The policy shall apply to liability assumed by the Lessee under this Lease, and this Lease shall be deemed to be an "Airport Contract" required by Lessor as a governmental authority as a prerequisite for the use of the Airport, the terminal building, and Lessee's designated space. D. At all times during the term of this Lease, and any renewal or extension hereof, Lessee shall, at its own cost and expense, provide, and keep in force commercial automobile liability insurance with a combined single limit for all owned, hired, and non-owned autos of not less than one million dollars ($1,000,000.00). E. Lessee shall obtain and maintain in force, at Lessee's expense, during the term of this Lease, Pollution Liability Insurance covering its liability for bodily injury, property damage, and environmental damage resulting from sudden and accidental releases of pollution, and covering related or resultant characterization, cleanup and/or remediation costs arising from the occupancy and use of the Airport, terminal building, and designated space. Combined single limit bodily injury, property damage, environmental liability and cleanup/remediation shall not be less than $1,000,000.00 in the annual aggregate. F. Lessee shall obtain and maintain Workers' Compensation and Employer's Liability coverage protecting Lessee against all claims under applicable State Workers Compensation laws. This coverage shall include all of Lessee's employees, including the owner(s), and shall contain an endorsement waiving subrogation against the City of Pueblo. G. Prior to the effective date of this Lease, Lessee shall furnish Lessor with a certificate of insurance executed by a duly authorized representative of each insurer, showing compliance with the insurance requirements shown above. H. Coverage and limits enumerated in this lease insurance provision represent only the minimum insurance required by the City of Pueblo, and Lessee should rely on its own expertise to obtain any additional insurance coverage needed to protect the City of Pueblo and the Lessee under this lease agreement and meet or exceed industry standards. In the event the premises covered by this Lease are wholly or partially destroyed or damaged so as to render the whole or a substantial part thereof unfit for occupancy, and the same cannot be repaired with reasonable diligence within one hundred twenty (120) days after the happening of such destruction or damage, or if Lessor, in its sole judgment determines that it is not economically feasible to repair same, then this Lease, at the option of the Lessor, shall cease and terminate as of the date of such damage or destruction. Upon such termination, Lessor shall repay to Lessee any rents theretofore paid by Lessee with respect to any period Page 8 of 19 after the date of such termination. Lessee shall surrender possession of the premises to the Lessor upon such termination. If, in the sole opinion of Lessor, such destruction or damage can be repaired within one hundred twenty (120)days, Lessor shall forthwith repair the same with all reasonable diligence, and this Lease shall continue in force and effect. During the period of such repair, the rent shall be abated in the same ratio as that portion of the premises which is rendered unfit for occupancy bears to the whole. Xl. CANCELLATION BY LESSOR. Lessor, in addition to other rights of termination or cancellation given herein or by law, may cancel this Lease and terminate all or any of its obligations hereunder by giving Lessee thirty (30) days advanced written notice, upon or after the happening of any one of the following events: A. The filing of Lessee of a voluntary petition in bankruptcy. B. The adjudication of Lessee as bankrupt pursuant to such proceeding. C. The appointment of a receiver of Lessee's assets or the divestiture of Lessee's estate herein by operation of law. D. The abandonment by Lessee of its conduct of air transportation service at the Airport. E. The default by Lessee in the performance of any covenant or agreement herein required to be performed by Lessee and the failure by Lessee to remedy such default for a period of thirty (30) days after receipt from Lessor of written notice to remedy the same; provided, however, that no notice of cancellation, as above provided, shall be of any force or effect if Lessee shall have remedied the default prior to receipt of Lessor's notice of cancellation. F. Recapture of the Airport by the federal government and assumption of control over aviation activities at the Airport by the federal government for a period of more than thirty (30) days. G. Issuance by any court of competent jurisdiction of any injunction in any way preventing or restraining the use of the Airport or any part thereof for airport purposes, and such injunction remaining in force for a period of at least thirty (30) days. XII. CANCELLATION BY LESSEE. Lessee, in addition to any other rights of termination or cancellation given herein or by law, may cancel this Lease and terminate all or any of its obligations hereunder at any time that Lessee is not in default in its payments to Lessor by giving Lessor thirty (30) days advance written notice upon or after the happening of any one of the following events: A. The order or the action of the Federal Department of Transportation or other governmental authority terminating, suspending, or relieving Lessee's right or obligation to operate. Page 9 of 19 B. Issuance by any court of competent jurisdiction of any injunction in any way preventing or restraining the use of the Airport or any part thereof for airport purposes, and such injunction remaining in force for a period of at least thirty (30) days. C. Any action by the federal government or it's agencies refusing to permit Lessee to operate into, from, or through the Airport such aircraft as Lessee may reasonably desire to operate thereon, if such action prevents Lessee from providing essential air services to Pueblo. D. The inability of Lessee to use leased premises and facilities continuously for a period of longer than thirty (30) days due to any deficiency of the Airport or unsafe condition for operating at the Airport of the type of aircraft then being flown by Lessee or any law, order, rule, or regulation of any appropriate governmental authority having jurisdiction over the operations of Lessee, or due to war or other casualty. E. The assumption by the United States Government or any authorized agency thereof of control of said Airport and facilities or any substantial parts thereof. F. The erection of any obstacle on or near the Airport which would occasion a modification of Lessee's air carrier operating certificate or similar authorization establishing minimum safety standards for the operation of Lessee. G. Unless the Federal Department of Transportation mandates a hold and that Lessee must continue to provide services at the Airport, at the expiration or termination of any Essential Air Service Contract("EAS Contract") between Lessee and the United States Department of Transportation ("DOT") or any governmental agency succeeding to the jurisdiction of the DOT, under which EAS Contract Lessee has or had agreed to provide Essential Air Services to The City of Pueblo, Colorado. XIII. ASSIGNMENT. Lessee may not assign or sublease the premises leased hereunder without the prior written consent of Lessor, which may be granted or denied in its sole and absolute discretion, except an assignment to a successor corporation which has merged with, or acquired substantially all the assets of the Lessee, if such successor corporation provides sufficient financial statements and records to Lessor demonstrating its financial ability to perform this Lease and specifically agrees in writing to perform this Lease. Any assignment made hereunder may be conditioned upon the payment of an assignment fee to be determined by the Lessor and/or an increase in rent. XIV. APPLICATION OF PUEBLO MUNICIPAL CODE. All terms and conditions of this Lease are hereby made subject to the provisions of the Pueblo Municipal Code, including but not limited to Title III, Chapter 1 thereof, and in event of conflict between said Pueblo Municipal Code and any provision herein, said Pueblo Municipal Code shall control. Page 10 of 19 XV. REGULATION. A. Lessee agrees to observe and obey all reasonable regulations imposed by Lessor during the term hereof, provided the same are consistent with safety and do not conflict with the regulations and procedures prescribed by the FAA for operation of Lessee's aircraft at the Airport. B. This Lease is subject to prior FAA approval. XVI. NOTICES. Notices to Lessor provided for herein shall be sufficient if served personally or sent by certified mail, return receipt requested, addressed to: Director of Aviation, Pueblo Memorial Airport, 31201 Bryan Circle, Suite 200, Pueblo, Colorado 81001; and notices to Lessee, if sent by certified mail, return receipt requested, addressed to: Southern Airways Express, LLC, 2875 South Ocean Boulevard, Suite 201, Palm Beach, Florida 33480; or to such other respective addresses as the parties may designate to each other in writing from time to time. XVII. INVALID PROVISION; SEVERABILITY. It is further expressly understood and agreed by and between the parties hereto that in the event that any covenant, condition, or provision herein contained is held to be invalid by any court of competent jurisdiction, the invalidity of any such covenant, condition, or provision shall in no way affect any other covenant, condition, or provision herein contained, provided, however, that the invalidity of any such covenant, condition or provision does not materially prejudice either the Lessee or the Lessor in their respective rights and obligations contained in the valid covenants, conditions, or provisions in this Lease. XVIII. SECURITY. Lessee shall comply with and be responsible for all applicable: (1) FAA Regulations; (2) Transportation Security Administration ("TSA") Regulations; (3) City Ordinances; and (4) Airport Rules and Regulations; involving all of their leased area and use of the Airport and terminal building, including TSAR Part 1540, Lessor's FAA approved Airport Security Program, and all other Department of Transportation and FAA directives pertaining to airport security. A. The Airport participates in the Record of Arrest and Prosecutions Back ("RAP Back") program for Sterile Area and Restricted Area badged individuals. RAP Back provides an additional element to the background checks required of anyone who is authorized to have unescorted access to secured areas of the Airport. Upon notification to the Lessee, the airline will notify the Airport Security Coordinator ("ASC") within twenty four(24) hours of a disqualifying conviction as outlined in the Sterile Area and Restricted Area Badge applications. Any badge suspension or revocation will follow TSA regulations regarding disqualifiers outlined in the Code of Federal Regulations ("CFR"). In cases where a person's access is suspended while a disposition is being determined, the badge holder cannot be allowed or escorted into a secured or Air Operations Areas ("AOA"). Page 11 of 19 B. Lost or stolen badges or Airport issued keys must be reported to the ASC within two (2) hours of being discovered as missing or stolen. C. Firing or suspension of a Lessee's employee will require a notification to the ASC within two (2) hours and a subsequent return of any issued access media to the Lessor. D. Employees on leave for over fourteen (14) days must return issued access media to the Lessor. E. In the event that keys issued by the Lessor are lost, stolen, or otherwise compromised, the Lessee will assume financial responsibility of the fees associated with rekeying or re-coring. XIX. CONDUCT OF BUSINESS. Lessee agrees to operate for the use and benefit of the public and that in the operation of its business upon the leased premises, Lessee agrees to furnish good, prompt, and efficient services adequate to meet all the demands for its services at the Airport, including: (i) a phone number available to customers; (ii) providing staff to provide local in-person customer service; and (iii) providing a baggage pick up policy consistent with US DOT, TSA, and contracts of carriage that does not include utilizing City of Pueblo employees to achieve such means. XX. NON-DISCRIMINATION; AFFIRMATIVE ACTION. A. The Lessee will not discriminate or permit discrimination against any persons or class of persons by reason of race, color, religion, sex, sexual orientation, disability, or national origin in any manner prohibited by 49 CFR Part 21 of the Regulations of the Office of the Secretary of Transportation, or any amendments thereto. The Lessor reserves the right to take such action as the United States Government may direct to enforce this covenant. B. Lessee agrees to operate and provide services for the use and benefit of the public and to furnish good, prompt, and efficient services adequate to meet all the demands for its services at the Airport, to furnish service on a fair, equal, and not unjustly discriminatory basis to all users thereof, and to charge fair, reasonable, and not unjustly discriminatory prices for each unit of service, provided that Lessee may be allowed to make reasonable and nondiscriminatory discounts, rebates, or other similar types of price reductions to volume purchasers. C. The Lessee assures that it will undertake an Affirmative Action Plan as required by 14 CFR Part 152, Subpart E, as amended, to ensure that no person shall, on the grounds of race, creed, color, sex, sexual orientation, disability, or national origin, be excluded from participating in any employment activities covered in 14 CFR Part 152, Subpart E. The Lessee assures that no person shall be excluded on these grounds from participating in or receiving the services or benefits of any program or activity covered by such Subpart. The Lessee assures that it will require that its covered sub-organizations provide assurances to the Lessor that they similarly will undertake an Affirmative Action Plan and that they will require assurances from the suborganizations as required by 14 CFR Part 152, Subpart Page 12 of 19 E, as amended, to the same effect. XXI. ENVIRONMENTAL PROVISIONS. A. For the purpose of this Lease, "Hazardous Materials" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local government authority, the State of Colorado, or the United States government and shall include, but not be limited to: (i) substances defined as "hazardous waste," "restricted hazardous waste," "hazardous substance" or "hazardous material" under any applicable federal, state, or local law or regulation (Environmental Regulations); (ii) asbestos-containing materials; (iii) PCBs; (iv) petroleum or petroleum based products; and (v) lead. B. Lessee will comply with Environmental Regulations that are applicable to Lessee and its use of the leased premises and Airport. No activity shall be undertaken by Lessee, its guests, employees, agents, contractors, or subcontractors, on all or any portion of the leased premises and Airport which would cause or permit: (i)the presence, use, generation, release, discharge, storage or disposal of any Hazardous Material in, on, under, about, or from the leased premises and Airport or any part thereof in violation of any Environmental Regulations; (ii) any portion of the leased premises and Airport to become a hazardous waste treatment, storage or disposal facility without receiving proper governmental authorization, and in compliance with all Environmental Regulations; or (iii) the discharge of pollutants or effluents into any water source or system, or the discharge into the air of any emissions without receiving proper governmental authorization, and in compliance with all Environmental Regulations, including, without limitation, the Federal Water Pollution Control Act, U.S.C. Section 1251 et seq. and the Clean Air Act, 42 U.S.C. Section 7401 et seq. C. Except to the extent Lessor is covered by an insurance policy, Lessee agrees to defend, indemnify, and forever hold harmless Lessor, and its officers, employees, agents, successors, and assigns, from all claims, losses, damages, penalties, expenses and costs, including, but not limited to, attorneys' fees, characterization, remediation and cleanup costs, incurred by reason of the use, storage, generation, release, discharge, maintenance, disposal, or removal of Hazardous Materials in, on, under, about, or from the leased premises and Airport, or any part thereof, by Lessee, its employees, agents, guests, contractors and subcontractors. XXII. NON-EXCLUSIVE RIGHT. All rights not herein granted to the Lessee are reserved to Lessor and nothing herein contained shall be construed to grant or authorize the granting of an exclusive right within the meaning of Section 308 of the Federal Aviation Act of 1958 as amended. It is clearly understood by the Lessee that no right or privilege has been granted which would prevent any person, firm, or corporation operating aircraft on the Airport from performing any services, including but not limited to maintenance and repair, that it may choose to perform. )(XIII. DEVELOPMENT OF AIRPORT. Page 13 of 19 Lessee recognizes that from time to time it will be necessary for the Lessor to initiate and carry forward programs of construction, reconstruction, expansion, relocation, maintenance, and repair at and to the Airport in order that the Airport and its facilities may be suitable for the volume and character of air traffic and flight activity which will require accommodation, and that such construction, reconstruction, expansion, relocation, maintenance, and repair may inconvenience or interrupt Lessee's operations at the Airport. Lessee agrees that no liability shall attach to Lessor, its officers, agents, employees, contractors, subcontractors, and representatives by reason of such inconvenience or interruption, and for and in further consideration of the premises, Lessee waives any right to claim damages or other consideration therefore, provided, however, that this waiver shall not extend to, or be construed to be a waiver of, any claim for physical damage to property resulting from willful misconduct of the Lessor, its officers, agents, employees, contractors, subcontractors, and representatives. The Lessee shall be obligated to be pay all rent and fulfill all obligations of this Lease at all times, including, but not limited to, when access to the Airport is temporarily restricted due to routine construction, reconstruction, expansion, or other potential alteration of the airfield. XXIV. FORCE MAJEURE; NATIONAL EMERGENCIES. A. Any delays in or failure of performance by any party of its obligations under this Lease shall be excused if such delays or failure are a result of acts of God, fires, floods, storms, lightning strikes, labor strikes, labor disputes, accidents, pandemics, regulations or orders of civil or military authorities, shortages of labor or materials, or other causes, similar or dissimilar, which are beyond the control of such party. B. During a time of war or national emergency, Lessor shall have the right to lease the landing area or any part thereof to the United States Government for military use, and if such lease is executed, the provisions of this Lease insofar as they are inconsistent with the provisions of the lease to the Government, shall be suspended. XXV. AERIAL APPROACHES. By accepting this Lease, Lessee expressly agrees for itself, its successors, and assigns that it will not erect nor permit the erection of any structure, building, or object nor permit the growth of any tree on the Airport to a height not to exceed twenty-five (25) feet above ground level. In the event the aforesaid covenant is breached, the Lessor reserves the right to enter upon the property and to remove the offending structure or object and cut the offending tree, all of which shall be at the expense of the Lessee. Lessor reserves the right to take any action it considers necessary to protect the aerial approaches of the Airport against obstruction, together with the right to prevent Lessee from erecting, or permitting to be erected, any building or any other structure on or adjacent to the Airport which, in the opinion of the Lessor, would limit the usefulness of the Airport or constitute a hazard to aircraft. XXVI. UNITED STATES. This Lease is subject and subordinate to the terms, reservations, restrictions, provisions, and conditions of the deed of conveyance from the United States Government to the Lessor and to any other existing or future agreement between the Lessor and the United Page 14 of 19 States, relative to the use, operation, or maintenance of the Pueblo Memorial Airport and its appurtenant facilities, the execution of which has been or may be required as a condition precedent to the participation by any federal agency in the extension, expansions, or development of said Airport and its facilities. XXVII. EFFECTIVE DATE. Regardless of the date of execution, the effective date of this Lease is January 15, 2023 ("Effective Date"). )(XVIII. FAA LEASE REQUIREMENTS. A. The Lessor reserves the right, without any obligation on its part to do so, to develop, modify, change, improve, or abandon the Pueblo Memorial Airport or any part thereof, as it may determine in its sole discretion, at any time, regardless of the desires or view of Lessee, and without interference or hindrance from Lessee or liability to Lessee. B. The Lessor reserves the right, without any obligation on its part to do so, to maintain and keep in repair the landing area of the Airport and all publicly owned facilities of the Airport, together with the right to direct and control all activities of Lessee in this regard. C. Lessor shall have full and unrestricted right to enter upon those portions of the Airport occupied and leased herein by the Lessee, and Lessor, its agents, or representatives shall be permitted to inspect same during any regular business hours or upon twenty-four (24) hours' notice to Lessee. D. Lessee shall comply with the notification and review requirements covered in Part 77 of the Federal Aviation Regulations with respect to the construction of any structure or building on the Airport, or in the event of any planned modification or alteration of any present or future building or structure on the Airport. E. Lessor reserves for the use and benefit of the public, a right of flight for the passage of aircraft in the airspace above the surface of the leased premises and Airport, together with the right to cause in said airspace such noise as may be inherent in the operation of aircraft now known or hereafter used for navigation or flight in said airspace, and for use of said airspace for landing on, taking off from, or operations on or over the Airport. F. Lessee shall not make use of the Airport in any manner which might interfere with the landing and taking off of aircraft at Airport or otherwise constitute a hazard to aviation. In the event the aforesaid covenant is breached, the Lessor reserves the right to enter upon any area and cause the abatement of such interference at the expense of the Lessee. G. Lessor reserves the right to grant and to take easements or rights of way in, under, over, and across the Airport, in which event, Lessee shall only be entitled to compensation for damages to improvements of the Lessee destroyed or damaged thereby, but not to damages for loss of use of the leased premises and Airport. Lessor will attempt to ensure such easements or rights of way will not impede, Page 15 of 19 prohibit, or infringe upon Lessee's ability to carry out its authorized use of the Airport, but makes no guarantees as to such. H. Lessee agrees to annually complete and submit a Department of Transportation - Federal Aviation Administration Airport Activity Survey (FAA Form 1800-31), as may be amended, that documents Lessee's air taxi-commercial passenger enplanements for each calendar year. XXIX. MISCELLANEOUS. A. This Lease expresses the entire understanding and agreement between the Lessor and Lessee with respect to the subject matter hereof and shall be binding and inure to the benefit of Lessor and Lessee and their respective successors and approved assigns. No amendment or modification hereof shall be effective unless in writing signed by Lessor or Lessee. B. This Lease shall be governed by and construed in accordance with the laws of the State of Colorado. Venue for any action arising out of this Lease shall be Pueblo County, Colorado. Lessor and Lessee, to the extent permitted by law, waive trial by jury in any action brought on or with respect to this Lease. C. Lessee is leasing the leased premises and using the Airport "AS IS, WHERE IS, WITH ALL FAULTS" in their present condition. Lessor makes no representation or warranties of any kind or character, express or implied, with respect to the leased premises and Airport, including but not limited to, any warranty or representation as to suitability or fitness for a particular purpose, title, zoning, physical or environment conditions, utilities, governmental approvals, the compliance of the leased premises and Airport with governmental and environment laws and regulations, the truth, accuracy or completeness of any document or other information provided to Lessee by Lessor or any other person, or any other matter or thing regarding the leased premises and Airport. Lessor shall be under no obligation to maintain the leased premises and Airport or any part thereof in a particular location or condition. If the Airport shall permanently close or relocate, the use restrictions herein shall not apply, and the Lessee may use the leased premises and Airport for any lawful use or purpose allowed by the then existing Pueblo Municipal Code, or in the alternative, Lessee may terminate this Lease upon thirty (30) days prior written notice given to Lessor. D. The Lessee represents that it has inspected the Airport and facilities and accepts the conditions of same and fully assumes the risk incident to the use thereof. The Lessor shall not be liable to the Lessee for any damages or injuries to the property or personnel of the Lessee which result from hidden, latent, or other dangerous conditions on the Airport or leased premises. Lessee taking possession of the leased premises and use of the Airport shall be conclusive evidence that Lessee accepts the same in their present condition and that the leased premises and Airport are in good and satisfactory condition at the time such possession was taken. E. The acts and omissions of Lessee's employees, agents, contractors, and guests shall be imputed to Lessee for purposes of this Lease. Page 16 of 19 F. No provision of this Lease may be waived except by an agreement signed by the waiving party. A waiver of any term or provision shall not be construed as a waiver of any other term or provision. G. This Lease is expressly made subject to the limitations of the Colorado Constitution. Nothing herein shall constitute, nor be deemed to constitute, the creation of a debt or multi-year fiscal obligation or an obligation of future appropriations by the City Council of Pueblo, contrary to Article X, §20 of the Colorado Constitution or any other constitutional, statutory or charter debt limitation. Notwithstanding any other provision of this Lease, with respect to any financial obligation of Lessor which may arise under this Lease in any fiscal year, in the event the budget or other means of appropriations for any such year fails to provide funds in sufficient amounts to discharge such obligation, such failure shall not constitute a default by or breach of this Lessor, including any sub-agreement, attachment, schedule, or exhibit thereto, by the Lessor. H. Nothing in this Lease is intended, nor should it be construed, to create or extend any rights, claims or benefits or assume any liability for or on behalf of any third party, or to waive any immunities or limitations otherwise conferred upon the City of Pueblo, a Municipal Corporation under or by virtue of federal or state law, including but not limited to the Colorado Governmental Immunity Act, C.R.S. §24- 10-101, et seq. Each person signing this Lease on behalf of a party represents and warrants that he or she has the requisite power and authority to enter into, execute, and deliver this Lease on behalf of such party and that this Lease is a valid and legally binding obligation of such party enforceable against it in accordance with its terms. J. This Lease and all other documents contemplated hereunder may be executed using electronic signatures with delivery via facsimile transmission, by scanning and transmission of electronic files in Portable Document Format (PDF) or other readily available file format, or by copy transmitted via email, or by other electronic means and in one or more counterparts, each of which shall be: (i) an original, and all of which taken together shall constitute one and the same agreement, (ii) a valid and binding agreement and fully admissible under state and federal law, and (iii) enforceable in accordance with its terms. [Remainder of page intentionally left blank.] Page 17 of 19 IN WITNESS WHEREOF, the parties have caused this Lease to be executed as of the day and year first above written. [ SEAL ] CITY OF PUEBLO, A MUNICIPAL CORPORATION ATTEST: By City Nicho as A. Gradisar, ayor SOUTHERN AIRWAYS EXPRESS, LLC ATTEST: By Name , Title 'Jr' eM.J� Page 18 of 19 a'} ie Y. { y�. O A 1 m .'r X 7c X Z W m o X Z m N C O xo w o>O -) rn Pueblo Municipal Airport Terminal Level I u lir A t, c,euci 'o